La Argentina y el mundo: claves para una integración exitosa
By Francisco de Santibañes
For the past decade Argentina was isolated from international capital and commercial markets. As a consequence of the dispute with holdout creditors, the government could only borrow from countries like Venezuela, at one of the highest interest rates in the region. At the same time, both Néstor and Cristina Kirchner implemented protectionist policies that significantly reduced the country’s exports.
During these years, the country grew apart from the U.S., engaged in a long diplomatic battle with Uruguay over the installation of a paper mill on a border river, and toned down its fight with Iran over the terrorist attack on a Jewish association by signing a memorandum of understanding. In terms of regional integration, the Southern Cone customs union, MERCOSUR, was washed away while UNASUR embodied the 21st century socialism rhetoric.
In his book, Francisco de Santibañes—an expert in international relations and an entrepreneur—provides a roadmap for Argentina’s successful return to world politics and economics so that it can once again become a leading voice in the continent.
De Santibañes explores the numerous challenges and opportunities that globalization poses for Argentina’s economy. There is plenty in Argentina’s favor. The terms of trade have improved for the country at the same time that the reforms that are taking place in countries such as China—that are increasing consumption—should increase the demand for Argentina’s main product: food. The country also holds a comparative advantage in other industries, such as services, in particular the software, and energy sectors (Argentina has the second largest shale gas reserves in the world and is becoming increasingly competitive in renewable energy).
Given this scenario, De Santibañes recommends that the government abandon the protectionist policies of the past to link itself to the world economy through free trade agreements. This, he expects, will increase productivity and wages, but should be done in a smart way, by achieving social consensus and establishing a web of social policies to support those who suffer during the transition.
De Santibañes also identifies what he believes should be Argentina’s national interests and how it should pursue them. He argues that the first of these is fostering the international economic system and integration, through the embrace of globalization and free trade. Second, he believes that the country is uniquely placed to develop positive relations with the greatest number of nations, a necessary step to increase trade and attract new investments. For this to happen, the relationship with the U.S. needs to improve, while maintaining constructive relations with other countries, such as China, that are important for its development. As part of that, Argentina should avoid unnecessary conflicts, such as those with Chile, Uruguay and the United States. Third, the country should retain a level of autonomy while counterbalancing the rise of any regional power.
With the same cold-eyed realism, the author warns that Argentina should not try to play great power politics, for which it simply does not have enough resources. Regional politics should be the country’s playing field.
The book also explains the two main trade blocks in the region: Mercosur and the Pacific Alliance. These two blocks pose different models of integration, the first being more protectionist, and the latter more open. Underlying these models is the political rivalry between Brazil and Mexico for regional leadership. Argentina, the third key power in Latin America (after Brazil and Mexico), could become a “bridge” that helps unite the blocks into a single free trade area. This would not only allow Argentina to gain more influence, but would also promote a more united and prosperous Latin America.
But the author also warns that Argentina will never become an international player if it doesn’t pay attention to its institutions. Among those, de Santibañes gives priority to a stronger judicial system, a better functioning Congress and a more efficient public administration, as paramount institutions to achieve the necessary inter-temporal agreements to open the economy with social consensus.
A special mention is given to the role that sovereign wealth funds can play in averting a Dutch disease after discovering natural resources, allowing governments to pursue countercyclical policies in times of need. Should Vaca Muerta’s potential be realized, de Santibañes argues that the country should explore establishing its own sovereign wealth fund.
In its last section, the book deals with some peculiarities of the Argentine case, such as the lack of a powerful and innovative private sector. Indeed, in the last few decades the role that Argentine firms play in the economy has declined relative to what happens in other Latin American countries. Too often, national companies have asked for higher regulations and protectionism to avoid both domestic and international competition. By doing so they lost the capacity to create more and better jobs. To foster a more vibrant private sector, the country not only needs to improve rule of law, lower taxes, and streamline regulations, the business community also needs to undertake a profound change in the way they do business.
Does Macri’s administration reflect the views expressed in this work? De Santibañes states that most of the measures taken so far are very encouraging. Some doubts, however, remain. Will Macri have the willingness to advance free trade agreements and transform Mercosur—all decisions that will awaken the opposition of powerful unions and pressure groups—and, most importantly, defend the vision of an Argentina integrated into the world? If this does not happen, de Santibañes argues that it will become very difficult to build the kind of social and political consensus necessary for Argentina to fully embrace the world and reach its full potential.
Interested in reading more? You can purchase the book online here (only available in Spanish).